mbozek

From whom did the client receive such advice? Since the PBGC liabililites for benefits under insolvent plans it has taken over exceed the value of the assets in its trust needed to pay benefits why whould it voluntarily want to take over another plan?

For deducton purposes the contributions must be made no later than 9 1/2 months after the end of the employer tax year, assuming that the employer has filed for extensions. Rev. rule 76-28. Eg. if the er tax year ends on 12/31/02, the employer contributions for the 02 tax year must be contributed by 10/15/03 in order to be deducted for 02.

What does the resolution say? A properly drafted resolution will contain a provision authorizing corporate officers to carry out the board resolution by taking appropriate action which would include filing a determinaton request and distributing assets. If not then consult the attorney who drafted the resolution.

While the employer cannot seize the benefits, the participant could voluntarily assign the benefits to the employer after the benefits are payable. Reg. 1.401(a)-13(e).

Financial advisors who give advice on using RE for IRA investments are not the best advisors for complex tax rules. First there is UBIT on IRA assets used as collateral for a RE loan. Second the PT rules of IRC 4975 prevent a fiduciary (the IRA owner) from using IRA asset for his own personal benefit or selling,buying or leasing assets from or to the IRA. (There is also a case where the assets in an IRA were treated as distributed because the IRA owned a house in which the IRA owner lived.) Third owning RE in an IRA results in the loss of substantial tax benefits such as deductions for property taxes, maintence expenses, insurance, legal fees and depreciation and all distributions are taxed as ordinary income instead of capital gain. Also the IRA must be valued each year under IRS rules. In addition there are substantial liability risks associated with owning RE such as for negligence or environmental violations. For this reason there are few custodians who will hold RE in an IRA and they charge substantial fees for acting as a custodian to pay for insurance. Holding the RE outside of the IRA means that the IRA makes a loan to the RE owner and takes back a secured interest in the IRA such as a mortgage. Provided the PT rules are complied with, it is perfectly legal and the mortgage payments are tax deferred earnings which are added to the IRA assets. However the IRA bears default risk if the debtor stops payments and would have to incur legal expenses to recover the property and sell it to another buyer. The IRA would also not collect any income while the property is in forclosure. Finally the IRA is not eligible for capital gains when the property is sold by the owner. I would not rely on any advisor who claims that an IRA owner could use an office in a building owned by his IRA or take a vacation in a residence that your IRA owns since the PT rules prohibt the IRA owner from using IRA assets for his personal benefit. Note: There are exceptions to the PT rules where several owners including an IRA purchase an interest in RE through a limited partnership or other device but there are substantial legal/tax costs involved in complying with the PT rules which will have to paid by the IRA owner. The IRA will incur UBIT if the IRA owns an interest in property used as collateral for a loan. The client needs to consult a tax/legal advisor to discuss an RE investment using IRA assets.

GB: State unclaimed property laws require that property in which there has been no activity by the owner(such as deposits or withdrawals) over a period of time (usually three years) is deemed abandoned and must be transferred to a state agency such as the controller as custodian until the owner comes forward to claim the property. The unclaimed property laws apply to property being held by banks, brokerages and insurance companies duing business in the state. Financial institutions are periodically audited by state regulators to see if abandoned property is being turned over to the state. IRAs are not covered by the non alienation rules of ERISA which preempt state unclaimed property laws.

You can withdraw roth contributons at any time without tax. Earnings are taxable unless withdrawn more than 5 years after the roth was open and there is a disributateable event e.g. age 59 1/2. See IRS Publicaton 590 for details at IRS.gov web site.

403(b) plans are required to be administered in accordance with the IRC, not plan terms. There is no remedial amendment period for adopting amendments. There are no IRS approved prototypes.

DOL has issued opinions premepting state labor laws in Puerto Rico and NY requiring employee consent for wage withholding to benefit plan subject to ERISA on the theory that state laws interfere with the funding of ERISA plans. Opinions 94-27A, 93-05A and 88-17A.

See reg. 1.411(a)-4(b)(6)- benefit which is payable can be forfeited on account of the inability to locate the particpant provided that the benefit will be restored if a claim is made at a later date. If the plan provides for payment after death of a participant then the benefits can be forfeited. Plan needs to be amended to provide for forfeiture. Provision would apply to amounts payable under the plan as of the date the amendment is adopted.

Bankruptcy ct orders are enforceable under federal law. Also ERISA does not preempt any other federal law such as bankruptcy law. Finally the owner of the assets of the bankrupt co is the bkcy ct which has title to the estate. There are no owners while the company is in ch 11. RLL just who is the plan trustee supposed to negotiate with? The ESOP trustee can only negotiate with the bankruptcy trustee who is directing the termination. The value of the equity interest in the company is the value which remains after all administration expenses and creditors are paid off. In almost all bankruptcies the holders of equity are wiped out 100% and creditors receive ony a few cents on the dollar. And who would pay for the cost of the negotiaions?

I dont think spouse's #1's 50% J & S benefit can be curtailed or altered if there is no provision for a substitution or assignment of the benefit to another person under the plan. If the plan only provides a 50% survivor benefit to a spouse and no other person then the spousal benefit is vested at retirement and a qdro cannot require the plan to provide any other form of benefit not provided by the plan. IRC 414(p)(3)(A). I dont think the plan must provide a survivor annuity to a spouse who marries a participant after benefits commence. If the employee and spouse 2 divorce, then spouse 2's right to his retirement benefit will be limited to the amount he is receiving under the plan but could not reduce spouse's 1 right to the 50% J & S benefit. Finally the Hopkins decison could be viewed as applying the law as written since 414(p)(1)(A) only permits an assignment of benefits payable to a participant and after retirement benefits begin the 50% spousal annuity is not a benefit payable to the employee (since that benefit is vested in the spouse).

The allocation of costs of terminating a plan of an employer in bankruptcy is within the jurisdicton of the banckruptcy ct. The Trustee who is appointed by the court will make the decision of who will pay for the cost of terminating the plan. You should contact the trustee.

A participant is only taxed an amounts distributed. If the fee is removed from the participant's account before distribution, then the participant should only be taxed on the amount actually received.

He should take the 2002 mrd, pay the 50% excise tax and ask for a waiver of the excise tax see instructions to form 5329 and Pub 575. He should retain tax counsel to request the waiver. Also take the 2003 mrd by 12/31.

While I agree with RLLs analysis there is a question as to whether a participant should rollover the $700 capital gain when it is subject to a maximum federal tax of 15% ($105). Rolling it over to an IRA will result in not only the $700 but any earnings being subject to marginal income tax rates which could be more than 15% at distribution.

I think the question of paying interest on benefit claims can be classified as follows: 1. State insurance laws mandating payment of interest on health benefit claims are preempted by ERISA from application to self funded plans which are not MEWAs by applicable Sup Ct. precedents whoch preempt state laws that relate to a plan. (E.g., self funded plans subject to ERISA are specificially exempted from recently proposed MEWA regulations issued by the NJ ins. dept). 2. While a self funded plan administrator could permit payment of interest for late payment I have never seen any such plan provison. A provider could not unilaterally impose such a provision as a condition to providing service. Every contract between a SElf funded plan or HMO and a provider who treats participants that I have reviewed requires the provider to accept the amount determined by the plan/HMO. The provider is required to sign the contract before submitting claims to the plan/hmo. 3. A provider who accepts payment from a Plan/HMO under an assignment from the participant will not be able to collect interest from the participant under a separate contractual agreement between the provider and the participant because the contract between the provider and the plan/hmo contains a provision that forbids a provider who receives payment from collecting any amount from the individual participant (other than any required co-pay). 4. A provider could collect interest from a participant if the participant signs a separate contractual agreement with the provider which provides for payment of interest and the participant is reimbursed by the plan/hmo for the treatment without any separate contract between the provider and the plan/hmo.

the $9500 limit was effective beginning 1987. Prior to 1987 the limit on elective deferrals was governed by the MEA which generally limited contributions to the lesser of 20% of net compensation or the 415© limit ($30,000).

What is the purpose of the sub trust? There is no need to get IRS approval that LI can be used as an investment in a qualified plan. Is the sub trust being recommended as a way to get LI out of the estate of the employee so that it will not be includible in his gross estate? If so then the issue is whether the sub tust violates the non alienation and exclusive benefit rules for Q plans because the assets are not held in a qual plan trust. I dont think the IRS will approve this issue. There is a risk that the IRS would reject this provision if it is pointed out because it is inconsistent with the requirements for qualified plans.

T: what is this provison that you want the IRS to specifically note? As previously stated the IRS reviewers are required to stick to the script and review the applicable provisions of IRC 401(a) that apply to the plan.

The client needs to retain tax counsel to determine if the payment is a reversion from a qualified plan or is a dividend due the sponsor.

GB: If you had read the post you cited you would have seen that the KY ins. law is applicable to self-insured non ERISA plans and HMOs regulated as insurers. The Ky law upheld by the SUP ct did not regulate a self funded single employer welfare plan subject to ERISA and exempt from state ins.laws. The cases cited earlier are still the ruling precedeents on the preemption of state ins laws under ERISA.

A non 5% owner in a qualified plan over age 70 1/2 is not required to commence mrd until the april 1st following the year of retirement. If he retired in 8/03 then he has until 4/1/04 to commence mrds. IRC 401(a)(9). Technically he should have had the MRD for 03 withheld from the distribution but he can take his mrd from the IRA by 4/1/04.

ERISA preempts all state laws that pertain to a self funded plan which is not a MEWA, including insurance laws. ERISA 514(a); Met Life v. Mass., 471 US 724 (1985); FMC Corp v. Holiday 498 US 52. I am assuming that the claims are for treatment of plan participants which were assigned to the provider instead of being paid to the participant. Payment of claims for health benefits from a self funded plan is definitely a payment under a plan subject to ERISA since there is no shifting of risk to an insurer.

Where is that stated? A contribution made after the end of a year but before the expiration of the time for filing a return with extension is only deducted for that prior tax year if (a) the employer desigates in writing to the Plan admin that the contribution is on account of the prior year or (b) the employer claims the contribution as a deduction for such prior year. Rev. Rul. 76-28. Most employers use (b). If an employer claims a 2000 contribution made prior to 8/16/2000 as a deduction on the 2000 tax return then it is a deduction on the 2000 return not 1999. The contribution made in 2000 is only a 1999 deduction if the employer elects to treat it as a payment for 1999 not because it is made before the expiration of the extension period for filing the 1999 return.